Buy a $40,000 piece of equipment and you have a choice: deduct a slice of its cost each year over its useful life, or deduct most or all of it now. Two provisions — Section 179 expensing and bonus depreciation — make the second option possible, and recent law has made them more generous and more permanent. Bigger deductions are not always better, though, so it is worth understanding how these work before you sign a purchase order in December.
This is general information, not individual tax advice — the right treatment depends on your specific situation.
Why the Timing of a Deduction Matters
Depreciation does not change how much you deduct in total — it changes when. Accelerating a deduction into the current year lowers this year's tax and defers it, which is valuable when cash is tight or when you expect this year's income (and rate) to be high. It is less valuable, or even counterproductive, if you expect to be in a higher bracket in future years.
Section 179: Immediate Expensing, With Limits
Section 179 lets you elect to expense the full cost of qualifying business property — equipment, machinery, off-the-shelf software, certain building improvements — in the year you place it in service. For tax years beginning in 2026, the maximum Section 179 deduction is $2,560,000, and it begins to phase out dollar-for-dollar once your total qualifying purchases for the year exceed $4,090,000 (both figures are inflation-adjusted annually). Two other limits matter: Section 179 cannot create or increase a business loss — it is capped at your taxable business income, with the excess carried forward — and it is elected asset by asset.
Bonus Depreciation Is Now Permanent at 100%
The One Big Beautiful Bill Act made 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025. Unlike Section 179, bonus depreciation has no dollar cap and no taxable-income limit — it can create a loss — but it generally applies to an entire class of assets at once unless you elect out of that class.
How the Two Work Together
When both apply, the ordering is: Section 179 first, then bonus depreciation on what remains, then regular depreciation on anything left. Section 179 gives you a scalpel — deduct exactly as much as you want on specific assets — while bonus depreciation is closer to a switch for a whole category. One important caution: many states do not conform to federal bonus depreciation, and some cap Section 179 well below the federal amount, so your state return may look very different from your federal one.
Vehicles and the Heavy-SUV Cap
Vehicles have their own rules. Passenger autos are subject to annual depreciation caps. An SUV with a gross vehicle weight rating between 6,001 and 14,000 pounds sidesteps the passenger-auto caps but has its own Section 179 ceiling — $32,000 for tax years beginning in 2026 — though remaining basis can then be recovered with bonus depreciation. Business-use percentage matters: drop below 50% business use and prior accelerated deductions can be recaptured. Our article on vehicle and mileage deductions covers the choice between actual costs and the standard mileage rate.
When Writing It All Off Now Is the Wrong Move
A full write-off this year means no deduction against that asset in future years. If you are launching and expect higher-income years ahead, spreading depreciation forward can be worth more. Large current-year deductions also interact with the qualified business income deduction and with how much salary an S-corp owner needs to justify, and selling the asset later triggers depreciation recapture taxed as ordinary income. The right answer depends on your multi-year picture, not just this purchase.
How VarStan Helps
We model equipment purchases across several years — federal and state, Section 179 versus bonus, this year versus next — so the deduction you take is the one that actually lowers your total tax, not just this year's. If a big purchase is on the horizon, that analysis is worth doing before you buy.